58 INTEGRATED ANNUAL REPORT 2022 Whoever said that accounting was boring, never had to deal with the Rand : Dollar exchange rate. After setting the NCT budget exchange rate at a reasonably conservative SAR15.20 : 1 USD after the highs of 2020, we did not achieve this rate again until late in 2021. Meanwhile, our marketing team worked hard in the background and the volumes processed helped to more than compensate for the dismal exchange rate. These sales volumes, along with the late increase in the exchange rate allowed NCT to re-instate prices for Acacia and almost completely re-instate Eucalyptus prices to the same values as at the beginning of the year over and above increasing Acacia prices. True to exchange rate volatility, after this decision was made, the exchange rate strengthened again, but despite this, we were able to post good profits for both the co-operative and the group for the year. The gross profit percentage is similar to that of the prior year, which indicates that we have kept prices as high as possible. It is worth noting that the average exchange rate achieved on export receipts in the 2022 financial year was R1.42 less than the prior year. This is a significant difference. On the volume sold in the current year, this higher rate would have yielded an additional R230 million in turnover. Chief Financial Officer’s Report K E R RY MO F F E T T This is a clear indication of the risk the group faces from exchange rate volatility. During the year NCT refined its hedging policy. This has worked well and allowed us to take better control of exchange rate risk. Although not an exact science, with careful and prudent hedging, there is more certainty in the short-term and NCT is able to plan better with respect to cash flow and pricing. Volumes processed were the highest achieved in years, and consequently export sales and turnover reached record levels in the 2022 financial year. BayFibre (Pty) Ltd and NCT Durban Wood Chips (Pty) Ltd chipped over one million tonnes of timber on contract to NCT and Richards Bay Wood Chips chipped over 550 000 tonnes of timber. Export volumes were slightly less than intake and turnover reached nearly R2,8 billion for the year including local sales. Profits were impacted by more than inflationary increases in net operating costs as a result of variable cost increases linked to volumes processed, as well as operating costs starting to normalise as staff returned to many pre-Covid activities, such as travelling and working from the office. Salary increases were limited
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